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Will Indie Films Benefit From Digital Projection Conversion

Paul Richardson, CEO and President of Sundance Cinemas
Monday, July 25th, 2011

Every year for the past five Showest confabs (the annual movie theatre owner convention in Las Vegas) has been dubbed the year of “digital cinema.” For movie theatre owners, the decision to buy digital projection equipment for their new build locations made sense, but spending $100K per booth to replace perfectly good 35mm equipment in existing theatres was not worthwhile. Progress was slow. The major film studios, however, who stood to reap significant costs savings in print making and shipping, figured out they needed to provide some incentive to speed up the process. They got together and conjured up a complicated partial equipment reimbursement program called Virtual Print Fees. That finally started the ball rolling a little faster, but mostly because of 3D. At this years convention the shot came over the bow from the studios that they will not be “supporting 35mm prints” beyond 2012 . At that time, movie theatres that were not digital would simply go out of business. It was a shock.

For the top 3 circuits, who formed a combine with a financing package tied into a favored nations VPF program, it just meant accelerating the on-going conversion process. For the rest of the commercial movie chains in the country it meant undertaking a tough site by site analysis of which locations would be worth the investment. For the small independent and specialized movie theatre operators, it was their worst nightmare. If they didn’t convert, it meant they were limited to a small group of suppliers. If they did convert, the new digital equipment could not be used to show non VPF member films without paying a user fee. The irony of not being able to utilize the equipment you paid for, and didn’t want in the first place, unless you pay an additional use fee, is hard to swallow.

The news is also bad for the micro distribution companies who make a handful of prints and circulate them around the country. They probably won’t be able to afford a VPF user fee and the supply of 35mm equipped screens will be diminishing. Smaller films will continue to migrate to the web as there will be less opportunities for them to be seen on the big screen.

The only obvious winners are the major studios and the big commercial circuits. Their alliance will further limit the offerings at your neighborhood multiplex and accelerate churning through titles more quickly . The only other winners will be the attorneys that litigate the shake out of this seismic event.

For our part, Sundance Cinemas is going to try to straddle the fence with both digital and 35mm capability, offer our customers an alternative to the homogenization of the industry, and hopefully be able to pay our bills. But I don’t think everything is doom and gloom. My experience over the years is that the cream rises to the top: good films will find their path to viewers by word of mouth and an economic model will be developed and evolve. It will just take some time and be messy.